One company is reliance and other is abc co. Avg collection Period (acp) of reliance 50 days and 30 days of abc co.? So which you prefer and why?
Pls Reply
5 Replies
Back in the Game
(a)
(1273 Points)
Replied 31 December 2012
30 days , man....the lesser the Debtors Gets bolcked/faster is the collection of recievables,the more early is the realization of Funds ,tat makes repayment of working capital loan earlier...therefor reduces interest cost....on the contrary in case of Reliance,interest cost would be more....
Common sense of working capital management.
Rupesh Maheshwari
(ACA, Dip. IFR (ACCA))
(6166 Points)
Replied 31 December 2012
Thanks 4 replying.. i need the answer from Credit Manager - banker point of view
Back in the Game
(a)
(1273 Points)
Replied 31 December 2012
The concept remains the same...Banker would be interested ,in more interest,collection...therefor vice versa....
50 days...i e reliance
PREETI BEDI
(ARTICLE IN JALANDHAR)
(278 Points)
Replied 04 January 2013
from the bank credit manager point of view average collection period of 30 days would be preferred rupesh because bank manager is always interested in the liquidity and turnover ratios of the company...even if a company would be having a lot of current assests but the manager would be interested to know whether the company is having regular income or not....so tht the company can easily pay the instalments of loans or not....and the more less acp the company will have the more quickly the debtors will be converted in cash and the company would be able to pay the instalments....so abc co. having acp of 30 days would pe preferred....
i m sorry for this lengthy reply but to make the concept clear to you i have to expand my explanation.....
Back in the Game
(a)
(1273 Points)
Replied 05 January 2013
| Originally posted by : preeti kaur bedi | ||
 |
from the bank credit manager point of view average collection period of 30 days would be preferred rupesh because bank manager is always interested in the liquidity and turnover ratios of the company...even if a company would be having a lot of current assests but the manager would be interested to know whether the company is having regular income or not....so tht the company can easily pay the instalments of loans or not....and the more less acp the company will have the more quickly the debtors will be converted in cash and the company would be able to pay the instalments....so abc co. having acp of 30 days would pe preferred.... i m sorry for this lengthy reply but to make the concept clear to you i have to expand my explanation..... |
 |
Like Borrowings,Being offered to any other Venture.The Bank will always ve a target interest rate to cover...
more over as far as liquidity is concerned bank would be bothered but not to tune of 20 days i think when they ve an oppurtunity to grab more interet collection....
A point raised abt recovery of funds offered is certainly a matter of concern...
Bank never provides Working capital loan...without security...thats the essence of banking business,So u see most of public sector banks mint money like hell..no matter client makes business or not but they make money....
there will be primary Mortgage of stock,drs etc..
Further secondary attachment will always be Premises of business,Factory,Assets....
lastly personal guarentee of directors....
kindly check any Sanction letter...
However a Good Point raised....
to conclude,it will depend on context.
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